Spotify Buys Music Discovery Company Echo Nest in $100M Deal

Echo Nest, a company that specializes in technology for music discovery, is now part of the streaming music service Spotify. The deal set Spotify back some US$100 million, and gives it control over the music discovery system it, as well as several other companies, use daily.

Spotify buys music discovery company Echo Nest

Spotify isn't commenting on exactly how much money it spent to buy Echo Nest, but sources speaking with TechCrunch said it was about $100 million. Part of the deal included multimillion dollar payouts to company founders Brian Whitman and Tristan Jehan, as well as CEO Jim Lucchese.

Echo Nest provides music discovery and streaming personalization services to Spotify competitors such as Rdio and Beats Music, and other companies like MTV, VEVO, Yahoo!, BBC, Twitter, and Foursquare. Those companies will still be able to take advantage of Echo Nest's technology because Spotify has said it will leave the APIs they're currently using open and free.

Apple isn't on that list because its iTunes Radio service relies on Gracenote for music discovery.

The music discovery technology Echo Nest provides suggests songs based on what you're currently listening to as well as your listening history. The better the tech behind the discovery, the more likely it is that listeners will hear songs they really will like, and that's what Spotify, Rdio, Beats Music, and others want for their subscribers.

Owning Echo Nest outright gives Spotify control over how it uses the discovery and listening customization features, and takes away its reliance on an outside company. For Spotify competitors -- at least for now -- they can carry on as they have, but with the realization that one of the core technologies they're relying on for music discovery is out of their control.

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The streaming music market is a hotbed of competition, and owning Echo Nest is a big thing for Spotify. It now controls the tech many of its competitors rely on for listener music discovery.